Economics at your fingertips  

On estimating shadow prices of undesirable outputs with efficiency models: A literature review

P. Zhou, X. Zhou and L.W. Fan
Authors registered in the RePEc Author Service: Xun Zhou () and Peng Zhou ()

Applied Energy, 2014, vol. 130, issue C, 799-806

Abstract: Undesirable outputs (or bads) refer to the byproducts accompanied with desirable outputs (or goods) in a production process, e.g. sulfur dioxide and carbon dioxide in coal-fired power generation. The shadow price of undesirable output, which may be interpreted as the opportunity cost of abating one additional unit of undesirable output in terms of the loss of desirable output, could provide valuable reference information for policy analysis and making. A prevalent practice is to use the Shephard or directional distance function to derive the shadow price, which can be further calculated by parametric or nonparametric efficiency models. In application, earlier studies have estimated shadow prices at plant, sector and even economy levels. This study aims to conduct a systematic review of the studies on estimating shadow prices of undesirable outputs with efficiency models. We first introduce the methodological framework for deriving shadow prices as well as the nonparametric/parametric efficiency models for calculating their values. A systematic summary of over forty earlier studies in this field is then conducted, through which the key features of the existing studies are summarized and possible future research directions are identified.

Keywords: CO2 emissions; Shadow price; Undesirable output; Efficiency; Distance function (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.elsevier. ... 405891/bibliographic

Access Statistics for this article

Applied Energy is currently edited by J. Yan

More articles in Applied Energy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2020-01-23
Handle: RePEc:eee:appene:v:130:y:2014:i:c:p:799-806